BOI imposes negative interest rate on pension cash

The Bank of Ireland (BOI) is to charge a negative interest rate of 0.65 per cent on ‘specialised accounts’, which includes accounts held by pension schemes.

Irish schemes will be impacted by the change if they hold an account with the BOI, which many do for basic transactions and liquidity purposes.

In a letter sent to a trustee firm seen by European Pensions, the bank said that a negative rate will apply to the credit balances of specialised accounts from 15 September 2020 of -0.65 per cent per annum. The amount of negative interest owed will be debited on a monthly basis.

Explaining it decision to impose the negative interest rate, the letter stated: “You may be aware that European interest rates have been negative for a number of years and have been forecast to remain negative for some time. This represents a cost for the bank in relation to keeping customer money on deposit. Given the sustained negative market interest rates, we unfortunately are not in a position to maintain today’s interest rate.”

Irish Association of Pension Funds (IAPF) CEO, Jerry Moriarty, said the move is a “concern for trustees”.

“It is a concern for trustees that the assets that are meant to be ‘safe’ such as government bonds and cash are guaranteed to lose value. Trustees need to maintain back accounts to ensure they have sufficient liquidity to manage payments to members and pay suppliers of services,” he noted.

    Share Story:

Recent Stories

Podcast: Opportunities in Chinese equities
China was the first country to be impacted by the coronavirus outbreak, which lead to its economy plummeting. Since then, however, the country has managed to keep outbreaks of the virus under control, and is experiencing a V-shaped recovery with many areas returning to normal.

In this podcast, David Choa CFA, Head of Greater China Equities at BNP Paribas Asset Management talks to European Pensions Editor, Natalie Tuck, about China, its position within the global economy and the potential institutional investor opportunities within Chinese equities.

Podcast: How can a cross-border approach to pensions benefit multinationals?
In this podcast, Irish Association of Pension Funds CEO, Jerry Moriarty and AMX Head of Client and Manager Development, Aaron Overy, discuss with European Pensions Editor, Natalie Tuck, how a cross-border approach to pensions can benefit multinational companies.
Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows

Europe’s pensions challenges
Francesca Fabrizi meets Matti Leppälä, Secretary General and CEO of PensionsEurope, to discuss the key aims and objectives of the association today.